The Agri-food Sector

In 2020, the agri-food sector, which includes primary (agriculture, forestry, and fishing) and the agri-food industry, accounted for 4.3% of Italy’s GDP (up from 4.1% in 2019): the primary sector contributed 2.2% (as in 2019) and the food industry 2.1% (up from 1.9% in 2019). Including the entire national food chain and its related industries, the sector exceeds 10% of GDP. In 2018, there were about 1.3 million employees in the Italian agri-food sector (+33.3% in 5 years).
Besides being important domestically, the agri-food sector is a driving force for the economy abroad,

carrying the Made in Italy brand worldwide.
In terms of trade, there was over 43 billion in exports in 2019 (more than +50% since 2008).
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Although, during the Covid-19 pandemic, the Italian agri-food sector was classified as essential and thus not directly subject to restrictions, agricultural companies had to face more or less significant difficulties depending on their commercial channels, target markets, dependence on external production factors, and location areas.
In 2020, the agri-food sector recorded, for the first time since 2016, a decrease in added value (-1.2% at current prices and -4% in volume).
It’s a pity considering that in the past the sector had grown more than the rest of the national GDP and the Italian manufacturing sector in general; in 2018 it had recorded +6.9% in exports compared to 2017, while the average national manufacturing had grown by +2.7%.
In 2020, olive oil production suffered the most significant reduction (-14.5%), while fruit production (+3.7%), cereals (+3%), milk (+2.7%), and vegetables (+0.2%) increased. The health emergency’s effects strongly impacted the secondary support activities (agritourism, marketing, subcontracting…) with a -20.3%, the floriculture sector (-8.4%), and support services to agriculture (-4.1%).

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Despite the negative performance of 2020, the agri-food sector is one of the most important in Italy. The secrets of its success can be found in various elements:
The claims about the excellent quality of Italian food products are supported by the European Union’s Geographical Indications system. This system recognizes three labels for quality foods:

DOP, acronym for Denominazione d’Origine Protetta (Protected Designation of Origin, PDO). In this case, the qualities and characteristics of the food are exclusively due to the specific and well-defined area of production. For example: Aceto Balsamico di Modena, Parmigiano Reggiano;

IGP, acronym for Indicazione Geografica Protetta (Protected Geographical Indication, PGI). In this case, the food has at least one characteristic linked to a delimited territory, but some stages of production may take place in other areas; however, certain production specifications are still respected. For example: Mortadella di Bologna or Abbacchio Romano;

STG, acronym for Specialità Tradizionale Garantita (Traditional Specialities Guaranteed, TSG). In this case, the food is not related to any specific production area but has characteristics that clearly distinguish it from similar products. For example: Amatriciana, Mozzarella, Pizza Napoletana.

Regarding wines and other alcoholic beverages, in Italy, one can distinguish, in descending order of quality, DOCG (Controlled and Guaranteed Designation of Origin), DOC (Controlled Designation of Origin), and IGT (Typical Geographical Indication) products. DOCG and DOC fall under the European PDO labeling, and IGT under the European PGI labeling.

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Challenges and Potential of the Agri-food Sector in Italy

Some critical issues are undermining the success of this sector. Many foreign companies, with names or images evoking Italy, sell food on international markets as Italian products. This phenomenon, known as Italian Sounding, allegedly costs Italian exports about 60 billion euros annually. To tackle this problem, it is important to continue institutional counteraction, strengthen the control system, and continue to invest in the Made in Italy brand globally.
The international market control is not the only battle to fight.
Generally, there is an excellent predisposition to export (over 30% of the analyzed realities realize 50% of their revenues abroad). Yet, only 30% of the examined companies had invested in the e-commerce channel. The digital transformation phenomenon is affecting every market: even agri-food companies should turn to online sales channels.

The Covid-19 pandemic has given a strong boost in this direction: for example, in 2020 there was a +74.9% increase in active e-commerce in the alcoholic beverages world.
From a profitability and financial solidity perspective, there are robust supply chains (coffee, food equipment, spirits, flour); others showing some criticalities (wine, pasta, frozen products, packaging, and water); others rather weak (cured meats, oil, and milk). To make the sector even more competitive abroad, good managerial practices that have achieved good results in certain supply chains should be extended everywhere.
On average, there is low productivity; as in the Italian manufacturing sector, this element could become a great danger in terms of competitiveness in the long run.
Italy is still lagging behind other European countries in the Agri-Food-Tech innovation landscape.
Especially slow is the “Agtech and Next-Gen Food & Drinks” business, which is probably affected by the skepticism of older generations towards “novel foods” such as plant proteins and alternative proteins. The “Farm management & Precision farming” sector, while well-represented in terms of the number of companies, requires more capital to become competitive internationally. Italy struggles to obtain such capital: with 6.3 million euros invested, Italian startups represent only 1.7% of all European investments in one of the most financed domains on the continent (to date 379 million euros). In addition, to the scant financial support from the Italian government, there is the peculiarity of an agricultural entrepreneurial fabric mostly composed of small companies with fragmented ownership, with only 8% qualifying as “industrialized” companies, compared to 27% in Europe.

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